NEW YORK (CNNfn) - One of Wall Street's worst weeks on record ended with more losses Friday amid signs that last week's deadly terrorist attacks took a big economic toll.|
The Dow Jones industrial average fell 14.2 percent this week, its worst five-day performance since the Great Depression. And its drop of nearly 1,370 points was its biggest one-week point drop ever.
Job cuts, profit warnings, and international instability all rose in the days since hijacked plans crashed into targets in New York and Washington, sending stocks lower every session this week and wiping out $1.4 trillion in market value.
"I've never seen fear take over like this in my whole career," John Bogle, the founder and chairman of the Vanguard Group, told CNNfn.
The airline industry, hit by travel disruption, announced more than 75,000 job cuts during the last five days. Insurance companies warned about billions of dollars in claims More than 55 companies said profits would fall short.
It wasn't supposed to be this way. Monday began with calls for a patriotic rally. It also started with the year's eighth interest rate cut by the Federal Reserve. And the Securities and Exchange Commission made it easier for companies to buy back their stock.
But the major indexes all fell to their lowest levels since autumn 1998. Trading volume set records. In their warnings, some companies blamed the effect of the attacks, which shuttered some businesses and could slow spending by recession-wary consumers and executives.
"Investors are very concerned about the short-term prospects for the economy, and that's why they are selling stocks," Alan Skrainka, chief market strategist at Edward Jones, told CNNfn.
Beginning overnight in Europe and Asia, Friday's selloff spread to the United States, where President Bush threatened retaliation against Afghanistan, which harbors attack suspect Osama bin Laden.
As they have for days, investors ran for the safety of Treasury securities, sending yields lower. The dollar edged higher against the euro and yen following big declines this week and last.
The Dow industrials sank 140.40 points, or 1.7 percent, to 8,235.81, for its worst weekly loss since a 15.5 percent decline in July, 1933.
The Standard & Poor's 500 lost 18.74, or 1.9 percent, to 965.80. Its 11.6 percent drop on the week was the worst decline since Oct. 23, 1987, which included Black Monday.
The Nasdaq composite index skidded 47.74, or 3.3 percent, to 1,423.19, falling 16 percent, its worst weekly performance since April of last year when tech stocks began tumbling.
The Wilshire 5000, the broadest of stock market indexes, fell 11.9 percent, losing $1.4 trillion dollars.
Four of the all-time heaviest trading days on the New York Stock Exchange occurred this week.
On Friday, more stocks fell than rose. NYSE declining stocks topped advancing ones 2,482 to 802 as 2.2 billion shares traded. Nasdaq losers beat winners 2,702 to 1,208 as 2.5 billion shares changed hands.
A rough week
The latest losses came amid rising international tension. President Bush broadened a campaign against terrorism, warning Afghanistan's ruling Taliban to turn over bin Laden or face punishment.
Responding, the Taliban said they would not turn over bin Laden without proof or evidence he was involved in the attacks.
"We could have a Gulf War scenario, and that's going to drive the markets lower, I'm afraid," Henk Potts, investment manager at Barclays Stockbrokers, told CNNfn.
Among the latest warnings, EMC (EMC: down $1.47 to $11.15, Research, Estimates), which makes data storage systems for large companies, said it will report a third-quarter loss, not the profit Wall Street had expected. The losses spread to rivals Brocade (BRCD: down $1.50 to $17.69, Research, Estimates) and Emulex (EMLX: down $1.18 to $10.31, Research, Estimates).
Dow Chemical (DOW: up $0.18 to $29.76, Research, Estimates) said third-quarter earnings estimates will fall short because of overall weak economic conditions.
DoubleClick (DCLK: down $0.87 to $6.18, Research, Estimates), the Internet advertising firm, said it will lose more money than analysts expected because the attacks have softened both online advertising sales and software sales.
But General Electric (GE: up $0.93 to $31.30, Research, Estimates) offered a bright spot. The conglomerate, the world's largest in market value, said it is confident of double-digit percentage earnings growth this year and next.
Traders on the floor of the New York Stock Exchange cheered when the Dow, buoyed by GE, turned positive at around 10:40 a.m. ET. But 20 minutes later, the blue chip indicator turned lower.
The volatility coincided with the quarterly expiration of options on stocks, stock indexes and stock index futures, an event that often brings big swings in stocks.
"There's an element of fear and an element of a long-term revaluation of the market going on here," Chris Wolfe, equity market strategist at J.P. Morgan Private Bank told CNNfn. He predicts that the market's bottom could still lie ahead.
Airline stocks stabilized following the week's big after congressional and White House leaders agreed on a plan to give $5 billion in cash and $10 billion in loan guarantees to the struggling industry.
Still, Northwest Airlines (NWAC: down $0.56 to $10.45, Research, Estimates) said Friday it will cut 10,000 jobs and reduce its scheduled service by 20 percent.
The attack will cost insurers billions in damage claims. Chubb (CB: up $0.91 to $59.50, Research, Estimates) said it expects up to $600 million in claims from the destruction of the World Trade Center, more than triple its estimate last week.
The former building's biggest tenant, Morgan Stanley (MWD: up $2.46 to $40.08, Research, Estimates), said third-quarter profit tumbled 41 percent. The quarter, which ended before the attack, saw trading volume slow while the business of mergers, acquisitions and underwriting suffered.
Nearly half of all Americans believe the terrorist attacks will push the U.S. into recession, according to a survey released Friday by the Conference Board. Slightly more than 30 percent said they or a member of their household would postpone or cancel plans to travel by airplane because of the tragedy.
Still, many analysts are optimistic, encouraged by the Federal Reserve's aggressive rate cuts and the high level of investor fear – which often signals the worst losses are near an end.
"Events like this generally create major opportunities," Brian Finnerty, head of Nasdaq trading at C.E. Unterberg Towbin, told CNNfn.
Healing will take time. The Dow finished the session down 23.6 percent on the year while the Nasdaq has lost 42 percent in 2001.
In the last week alone, United Technologies (UTX: up $0.61 to $42.25, Research, Estimates) fell 35 percent, Honeywell (HON: up $1.21 to $24.80, Research, Estimates) shed 32 percent and Boeing (BA: up $0.34 to $30.10, Research, Estimates) tumbled 31 percent.
Eugene Profit, president and portfolio manager of Profit Fund, said he expects the markets to move lower before eventually seeing a turnaround.
"I think the markets are trading on emotion right now as we're entering into a wartime economy," Profit said. "We're going to find value in the large liquid names in the next 24 months regardless of what happens in the economy."
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